Upturn In Bond Yields Triggered By Increasing Supply

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Tuesday, October 27, 2020 / 9:52 AM / by Zedcrest Capital / Header Image Credit: Spring News


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FGN Bonds

The FGN Bonds market opening session for a new week was met with a flurry of supplies, as demand slowed at the tail of the bond curve despite the bond coupon inflow that hit the system. Although demand for short and mid dated bonds remained very healthy, market appetite waned slightly for 2049s and 2050s which has been most-sort after bonds in recent time. The market quote opened the day at 7.00%/6.90% but jumped by approx. 32bps to close the day at 7.35%/7.20%. We also witnessed early morning interest in 2034s, 2036s, and 2037s papers as most market trades settled around the 5% levels for these maturities. By mid-day, we saw market activities snooze closing the day on a quiet note.

 We expect the demand sentiments to stay low for the week fueled by the recent CRR debit that took out the majority of market liquidity.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

16.39 27-Jan-22

4.69

1.02

2.57

 

12.75 27-Apr-23

5.38

0.97

2.63

 

14.20 14-Mar-24

5.92

1.18

3.24

 

13.53 23-Mar-25

3.03

1.33

0.00

 

12.50 22-Jan-26

3.52

3.20

0.06

 

16.29 17-Mar-27

4.08

3.09

(0.14)

 

13.98 23-Feb-28

4.09

3.55

(0.24)

 

14.55 26-Apr-29

4.13

3.46

(0.20)

 

12.15 18-Jul-34

5.18

4.78

(0.13)

 

12.40 18-Mar-36

5.24

4.80

(0.06)

 

16.2499 18-Apr-37

5.25

4.91

(0.02)

 

14.80 26-Apr-49

8.00

6.85

0.85

 

 

Treasury Bills

The OMO bills market resumed the week bullish, as demand from local banks persisted despite the measly level of system liquidity. The appetite for mid-and long-dated bills remained undented as few trades sealed on April/July bills settled around the 0.40% levels.

The NTB space witnessed slight movement especially for the Sept bills which gained most of the market traction.

We expect this demand to be sustained for the week, despite the low system liquidity which is expected to turn by mid-week when OMO maturities of N336.09BN and Bond coupon of N46.92BN hit the system.

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMO 11/03/2020

1.00

0.01

0.00

NGOMO 12/01/2020

1.00

0.75

0.00

NGOMO 01/05/2021

1.00

0.01

0.00

NGOMO 02/02/2021

1.00

0.01

0.00

NGOMOB 0 03/02/21

2.00

0.01

0.00

NGOMOB 0 05/11/21

2.00

0.01

0.00

NGOMOB 0 08/10/21

2.00

0.01

0.00

NGOMOB 0 09/07/21

2.00

0.01

0.00

NGOMO 11/03/2020

1.00

0.01

0.00

NGOMO 12/01/2020

1.00

0.75

0.00

 

 

Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 11/12/2020

1.00

0.01

0.00

NIGTB 01/14/2021

1.00

0.01

0.00

NIGTB 01/14/2021

1.00

0.01

0.00

NIGTB 02/11/2021

2.00

0.01

0.00

NIGTB 04/29/2021

2.00

0.01

0.00

NIGTB 05/13/21

2.00

0.01

0.00

NIGTB 06/10/21

2.00

0.01

0.00

NIGTB 07/01/21

2.00

0.01

0.00

NIGTB 08/26/21

2.00

0.01

0.00

NIGTB 08/26/21

2.00

0.01

0.00

NIGTB 09/09/21

2.00

0.01

0.00

NIGTB 11/12/2020

1.00

0.01

0.00

NIGTB 01/14/2021

1.00

0.01

0.00

 

Money Markets

The market opened from a large downslide in system liquidity following the huge CRR debit of over N800BN by CBN to commercial banks. The market opened the week with c.N100.73BN positive in system liquidity while OBB and OVN rate over around 6.00% and 6.25% levels respectively.

We expect the market rate to coast around this level tomorrow as the market doesn't expect any major funding requirement.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

6.00

9.00

Overnight (O/N)

6.25

9.75

 

FX Market

The interbank IEFX window opened the week on a quieter note, with traded volumes down by 81% ($37.23 m). The range of traded rates stayed wide trading in the highs of N393.11 and lows of N382.00/$ but slightly tighter compared to Friday while its closing rates remained unchanged at N386.00/$.

At the Cash and Transfer window, we saw slight activity although still trading at different levels staying wide at N15.

 

FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

386.00

386.00

Cash Market

460.00

459.00

Transfer Market

475.00

473.00

 

 

Eurobonds

The NIGERIA Sovereigns opened the trading week with little changes/activity recorded. Yields on the sovereign curve weakened by a single basis point, as sentiments towards the papers aligned with another consecutive session of lower global oil prices dropping below $40 per barrel. (BRENT dropped by 3.32% to close at $38.46pb).


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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